Business / Corporate

Mizuho investors reject Japan's first shareholder climate resolution

Bloomberg

Mizuho Financial Group Inc. investors rejected a shareholder climate resolution at an annual general meeting Thursday that had placed Japan’s third-largest bank in the spotlight for its financing of coal power projects.

The resolution, which its sponsor said was the first of its kind in Japan, would have required Mizuho to disclose climate risks and publish a plan to ensure its investments are aligned with the Paris Agreement. The Tokyo-based lender said in a statement earlier this month it already discloses goals based on the climate pact and that the proposal was “inappropriate.”

The initiative garnered 34.5 percent of votes cast in advance of the meeting, short of the two-thirds required to pass. A final tally has yet to be announced. Several high-profile global investors supported the motion, including Nordea Asset Management, a unit of Nordea Bank Abp with €235 billion ($265 billion) in assets under management, and Norwegian investment giants Storebrand ASA and Kommunal Landspensjonskasse.

“Given its size and historical involvement with coal-fired energy, Mizuho is at the same time specially exposed, and uniquely positioned to create value for both shareholders and society by accelerating” the economic transition away from carbon, Eric Pedersen, head of responsible investments at Nordea Asset Management, said in an email before the vote. “Exposure to coal presents a material risk to both to the companies involved and to the global climate.”

Japanese banks, among the world’s biggest lenders to coal power developers, have faced criticism for continuing the practice as global rivals withdraw in a bid to combat climate change. Lenders including Mizuho are financing the construction of plants in Southeast Asia that could lock in coal use for decades, while climate scientists advocate more immediate action to halt usage of the fuel.

Mizuho’s coal lending puts “the company at great risk of exposure to businesses that face devaluation in a transition to decarbonized economy,” according to the resolution from the anti-coal activist group Kiko Network.

Kiko Network said it filed the resolution in March because at the time it felt Mizuho had the weakest climate policy among Japan’s megabanks, which include Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. Mizuho strengthened its policy in April and Kiko says it now believes it is the strongest among its domestic peers, while still lagging behind those of global rivals.

Mizuho said in April that it plans to halve its ¥300 billion ($2.8 billion) in outstanding coal energy project finance by the year starting April 2030 and bring it to zero by 2050. It also aims to stop providing new loans for coal-fired power plants from this month.

For investors, the concern is that if global regulations on greenhouse gas emissions get stricter, it could force such plants to close before they pay off their debt.

Institutional Shareholder Services Inc., a proxy advisory firm, recommended support for the climate initiative because it would “place market discipline over management for continued improvement of climate-related disclosure practices” and allow investors to better evaluate the bank’s risk profile. Glass, Lewis & Co., which also supported the measure, said it could help mitigate “potential reputational risks on account of the company’s significant coal financing.”

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